George Cao Shares His Thoughts on the Crypto Exchange Landscape - Ep. 2

Speaker 1:   0:00
Welcome to the CoinGecko Podcast. I'm your host, Bobby Ong. Each week, we will be interviewing someone from the blockchain industry to learn more about this fast moving crypto currency economy. If this is your first time listening, then thanks for coming. The CoinGecko Podcast is produced each week to help you stay ahead of the curve. Show notes can be found at podcast.coingecko.com. I highly encourage you to join our newsletter where we send out top news in a crypto industry every Monday to Friday. Come back often and feel free to add the podcast to your favorite RSS feed or iTunes. You can also follow us on Twitter and Telegram at CoinGecko.  

Speaker 1:   0:42
Hi, everyone. Thank you very much for joining us on the second episode of the CoinGecko Podcast. For today's episode, we have the honor of welcoming George Cao, the CEO of BitMax.io. Just to be clear, this is a BitMax, "M A X." Not to be confused with BitMEX, "M E X" , the cryptocurrency derivatives exchange. So a little bit of the background, George Cao has over a decade of executive experience in building and managing quantitative trading and went to Capital Platforms in global financial markets. He has an in depth understanding a comprehension of product development strategy, research and risk management in global capital markets. Cao graduated with a Bachelor of Computer Science in the University of Science and Technology of China as well as earned his PhD degree in Computer Science from the University of Chicago. Welcome on the show, George.

Speaker 2:   1:31
Hey, thanks, Bobby. Thanks everyone. I'm happy to be here.  

Speaker 1:   1:34
So George, very happy to have you join us on the CoinGecko podcast. We have a lot of questions and one of the first questions is that we want to get started is we would like to know more about your personal story. How do you get involved in the blockchain and cryptocurrency industry and following that, what made you start BitMax.io?

Speaker 2:   1:57
Yea, I think this question are actually combined question. It's a unique question. So I would think, I will take it as one question, because I was not a early investor. I started to notice crypto since 2017 together with bitcoin rally. So at that time, the Bitcoin price and volume of history so high, so as you know, I have been a trader for over a decade, so my trader's instinct is that, "Hey, that's something I see with trading opportunity here". So starting from 2017, I actually starting research trading cryptocurrency, especially bitcoin. However, during the process, I find it extremely difficult for me to use my extended traditional financial market trading experience into the crypto because, one, the ecosystem has not been set up yet. And two, at that time, when the commission being very high, the cryptocurrency exchange on the technology is not that good. I mean even Coinbase still have system shut down multiple times back in 2017. So there's no way for me as a coin trader, especially high frequency trader, trading that industry because from both security and market structure or some form of technology wise, the risk is huge. As the research goes on, I ask myself, "Hey, if there's no better place for me to trade, why don't I just build my own exchange?". So I start pulling ideas with my friend, Ariel Ling, and also many other friends that I know in the traditional financial industry. So everyone of us, every one of us, think it's a great idea because every single pain point is a big opportunity. If I do this correct, if I do that correct, there would be a very good exchange. It's better than any other exchange in the world. That's why I came up with the idea of 2017, I want to build my own crypto exchange. And I assembled a team together and started working together in early 2018. And that's how BitMax come together. 

Speaker 1:   3:59
Very interesting. Actually, what you said goes very well with my next question because BitMax, I would say, receive a lot of interest from the crypto community when you first launched in mid 2018 due to the strong caliber of your team. So you briefly mentioned a little bit about your partner. Perhaps, do you want to walk us through a little bit about some of your, some of the credentials of your team?

Speaker 2:   4:21
Yeah, definitely. I think we are actually the most experienced team in terms of financial in the crypto industry. So all five core team members, founding members, all of us, combined have over, you know, 100 years working experience in Wall Street. So my partner, Ariel Ling who started her career from KPMG of Goldman is a veteran in the industry, so she actually was CEO at Barclays when i was in Barclays, I think, since 2010. When I was in London, when I joined Barclay's London office, actually Ariel was the COO multiple trading task including us. And then after Ariel quit Barclays, she had the broken dealer department in Commerzbank in New York City and later she joined Deutsche Bank to run their liquidity product department, and I actually persuaded her and asked her to join us. And everyone around her is like, "You're crazy. You quit your job in Deutsche Bank and join crypto industry". But we, I think it's a good move for her. So most us think it's a very, eye-opening as well. I think a slash happy and of course, very challenging experience, but in a good way. So that's me and my partner, Ariel. And for the rest of team, mostly our senior quant trader slash quant better press from washing. So our Head of Technology comes from Sterling and AQR, our senior Dev, comes from Deutsche Bank? And similarly, our another senior DEE, also the director of technology, with background from AQR as well. As you can see, all  founding members of BitMax are coming from traditional Wall Street background. So we have extensively extensive financial product design experience as well as managing experience. So that's pretty much about our team.

Speaker 1:   6:12
Yeah, yeah, very well said about all this things. The team is what makes a project go well or go south. So it's very important to assemble the right team to start any project. And you seem to have a lot of Wall Street veterans on the team. So, out of curiosity, is there a reason why you chose the name BitMax? It feels like many people in the crypto industry, find this name appealing. So from my count, they are three exchanges with similar sounding name. So you guys, there's BitMEX, "M E X", the derivative exchange and also LINE Corporation, LINE Corp's BITMAX, which is a Fiat crypto currency exchange in Japan. So yeah.

Speaker 2:   7:00
That's right. That's right. So, well, I have to confess that I'm not very good at giving name so BitMax  is my idea. Well, the meaning of the BitMax as our slogan, and is to maximize our potential. And also, we want to maximize the profit and the price of, Bitcoin. That's why the name come from. So to be very honest with you, we didn't actually, when we do our name check and due diligence on other exchanges. We never know the other exchange, BitMEX. Although they're big in a space, theynever actually come in our radar. That's partly because of reason we were very new to the crypto space at the time we started BitMax. The name itself, yes, you know, it's actually commonly asked question why we take up the name. But I think in 2020, we will pick a better name and be part of our rebranding process. So I think as we grow, we definitely need a better name for us to better represent the things of our exchange and to position of our industry as a re-branding process.

Speaker 1:   8:08
Very interesting to hear that you guys are thinking about re-branding a new name for BitMax.io. 

Speaker 2:   8:17
Yes, we have been talking and planning for more than half a year, but we are always, our hands always tied with all the projects. So I think eventually the time comes, we want to definitely re-brand.

Speaker 1:   8:25
Yeah. I mean, the re-branding exercise is never an easy task to do. There's a lot of assets and that needs to be changed.  

Speaker 2:   8:32
Yes, it's not. Yeah.

Speaker 1:   8:32
It comes with a lot of risk as well and re-branding exercise can always go wrong, if you don't do it correctly. So that's a lot of risk involved when doing a re-branding. So I understand why you guys decide to push this later because there's obviously more important things to focus on, like on products. Talking about products, I remember that you guys were the first exchange to conduct stable coin USDT, USDC, Trans-Fee Mining in late 2018. I'm curious, why do you guys decide to use Trans-Fee Mining as strategy in growing the exchange?  

Speaker 2:   9:10
Well, transaction mining, I personally view it as a marketing tool. The reason being that is, one, the exchange space is already very crowded back in 2018. So we have Binance, we have Huobi,  we have OKEx, we have Coinbase, we have Gemini, we have many other exchanges and we, in 2018, we saw the number of exchanges at some point is exceeding 7000 exchanges. I mean, there are more exchanges than project in the space. For us, as a brand new exchange, so how do we, how do we market ourselves? How do we do differentiate ourselves with the others? What is the marketing strategy that we use? It's very, very tough question for everyone of us to answer.  

Speaker 2:   9:50
So by the time, I think it's, it's better for us to introduce the transaction mining mechanism because one is, it  actually attracts organic volume exchange and two is, it's definitely a big marketing tool for us to attract interest and attract eyeballs in different industry areas. And I think the strategy itself is very successful. We, in several months, you know, they are attracted to us. I mean, in the very beginning, we only have maybe a few thousand dollars of trading volume on daily basis. In three months, four months after we set up, we see tens of millions of trading volumes every day. So I think that the strategy itself,  is a bootstrap strategy, of course, that is very successful. But however the challenge is, how do we convert that transaction mining exchange into regular exchange. So nobody in this industry have did it, successfully did it before.  We are the first one exchange to do a smooth transfer conversion from a transaction mining exchange into a regular exchange. The reason behind that is, transaction mining exchange is, there's a limit of development, meaning that to some extent, the volume and users stop grows and all of a sudden, the traffic will drops a lot. And this is due to no organic volume. And also the token price appears steady. Based on the mechanism, the transaction mining is using the harbor because our, you know, careful design of our token mechanism. And also, as long as we pretty much focus on organic volume in the later stage of our exchange. So we did a success, we got the first one to be very successful conversion run by transaction mining exchange to  regular exchange. So when we look back, there, of course there are things we didn't do correctly but mostly we're very happy with our strategy we're using. I hope that answers your question.

Speaker 1:   11:39
Yeah, Yeah, I think I remember at this, at this point I think Q3 2017, it was such a trend and every single Asian exchange was doing transaction fee mining. What's a bit boring was they were doing it for some Bitcoin USDT pair. But I remember you guys would've used stable coins like Tether/USDC and that was interesting. I think, I think, one of the things about trans-fee mining is that, is a bit controversial I suppose. A lot people, and as you mentioned not many people successfully transition to a regular fee exchange from trans-fee mining.

Speaker 2:   12:20
To us, I would say, we use the hybrid model. So not every single trading pair on our exchange has the transaction mining feature. To be honest, like two to three different pairs, Basically the stablecoin, like you mention and also bitcoin. The reason that we pick stable coin is that we want to minimize the market risk that miners are taking. Basically, if you're using mining with bitcoin and USDT trading pair. Miners have to take the risk of bitcoin market price. However, if you using stable coin mining, you 're actually to minimize the market risk of the underlying asset of the stable coins. That is one features that we, we think we want to benefit, ultimately benefit all the miners who work with us in the long run. So that's why we picked a stable coin. And to be very clear, a separable two or three trading piers every single other trading piers on BitMax are, you know, normal trading piers. Yeah, I guess that's a good reason why we successfully converted our exchange to a regular exchange went up to the stock transaction mining.

Speaker 1:   13:28
You have since announce that you have stopped all transaction fee mining in late 2019 after about a year of doing trans fee mining. I'm actually very glad that you guys have decided to stop this. To be honest, I'm not a big fan of trans-fee mining. Yes, it unnecessarily inflates each volume. If I remember correctly at one point, like in 2018 and so on, you guys were topping the charts for all transaction fee volume, man. It was mainly because your Tether/USDC pair, where it was easily racking over $1,000,000,000 in daily transaction volume. So what was the reason why you guys stop the trans-fee mining program?

Speaker 1:   14:08
Well, so it's actually, we actually designed to stop it at some point. When we start BitMax, the first stage of approach is that, you know, transaction mining. And then stop mining and turns it to regular exchange. The first stage is always on the regular side, if we want to open our exchange to other more regulated countries and open to, and open to more broader audience, I would say.  So at that point when we decide to stop transaction mining after a while, we can see our user and our trading volume has stopped increase using the transaction mining mechanism, meaning that transaction mining has already reached its limit six months after it started. That's one thing. Two is like you said, I appreciate you are honest because many people is not a big fan of transaction mining because the user had difficulty to understand where is the volume come from or they probably think volume is not organic. Therefore, we will hurt the trust between the users and exchange. So we at that point we found it's very difficult. We are reached a certain stage that we have actually relatively large user base as it's about the time for us to onboarding more institutional traders. Hi, we're curing the onboarding process with institutional traders. We found it very challenged to explain them, what is transaction mining. So when you talk to those very traditional old fashioned traders, they have no idea if they're new to crypto, even if somebody are already in crypto for quite some time, they still have, either transaction mining or like what you said, not a big fan of transaction mining. So it's very challenging for us to explain to them, this is not wash trading, all the bottom is organic. So at that point, I think it's about time for us to stop transactio mining. Downside risk is not that big because only two or three trading pairs are in the transaction, and most of them are stable coin trading pairs. So as you stop them, doesn't have impact on the other product of organic pulling of BitMax. And also stop that will make us, will make us make our job on boarding institutional investors, traders and also to help listing new projects much, much easier. So based on the all the reasons we have to finally to stop transaction mining. I also originally plan to stop it by the end of 2019. I think at that time, because the development of BitMax is faster than we thought. So we want to terminate the program earlier than we plan. Well, it turned out to be a pretty good decision because as soon as we stop transaction mining, there are so many investors onboarding us. The Trust Score, especially in CoinGecko, has being increased. So we are very happy with the result. So when people talking about BitMax right now, very few people still remember or will talk about BitMax as a transaction money exchange. So they will think of us as a regular exchange, which is a good thing for us.

Speaker 1:   17:10
Yeah, I definitely agree that the decision to stop trans-fee mining is a right one. I mean, the trend is died off. And I don't think anyone is doing anything about trans-fee mining anymore. Yeah, definitely a good choice to stop transaction fee mining. You also mentioned in your previous answer just now that one of the next phases for BitMax was to be a regulated exchange and to operate in the US. Maybe you want to expand a little bit on that?

Speaker 2:   17:37
Yeah, that's right. That's right. So BitMax was I mean, ah, a group holding company has different arms or different entities in different jurisdictions. BitMax is currently registered in Singapore and aim to serve global users trading between crypto and crypto. But, however, is due to the recent years, the regulation and regulatory side development very fast in almost all major countries. So BitMax in parrallel had different entities in us and in Canada, for example, in Canada market, the MSD license is approved earlier this year, and our US entity has already been set up earlier in 2019. So right now it serves as OTC platform for institutional and retail trader. But sometime in the future, it's always in our plan and we want to open up a US exchange and serve US investors. That's part of a global expansion plan. That's not under the umbrella of BitMax. It's more like a product equity.

Speaker 1:   18:38
Yeah. I mean, if you look at the global exchange landscape, everyone's excluding the American users, and at some point they all set up an American entity and start serving the US users. I think Binance is like a very good example and they started up Binance US and I guess it's just gonna be very competitive now in the US once you start launching it. So it's gotta be soon, I suppose.

Speaker 1:   18:59
Yeah, yeah. I mean, it's really depend on resource we have because we are now pretty much focused on to finalize our product line because, I mean, we are new exchange, not like Binance and will be resisting reaches a long time, for a long time. BitMax currently offering its crypto to crypto trading, margin product and OTC product as well. But however what missing is derivative market. So as soon as we will, I think in early, the first, the early stage of 2020, the primary focus of us is want to finish our product line, meaning that we want to offer derivative trading for our users as one thing, and two is we want to offer staking and also lending product to users. I mean, it's probably take three to six months to finalize all the product line and then we can talk about the expansion of other restrictions. Because BitMax is just small team. We have had roughly 70 people globally compare with other exchange who has, for example, Huobi has 1800 people. So we are still very small team. So we have to prioritize things.

Speaker 1:   20:07
Exactly. Choosing what to focus on is usually is very tough thing to do. So yeah. Yeah, definitely. So, yeah. You mentioned a little bit about derivative which is exactly the question that I want to ask next actually. So you guys has launched volatility cards. I had a look at your specifications and volatility cards look to me like a binary options product to me. Am I correct to say so? And also on your volatility cards you call it "turtle" and "bunny" cards that made me laugh a little bit but it also cute at the same time Because it makes it a little easy for the average traders to understand what those cards are doing. So, perhaps maybe you wanna tell us a little bit more about objective of the volatility cards and what you do with it and the reason why you guys launch it. 

Speaker 2:   21:00
Yes, so volatility cards I think it's different from binary options because binary option is two-directional meaning that we can either buy long or buy short. So if you buy long binary option to make money when market goes up, if you buy short you make money when market goes down. But volatility card is different, it's actually not treating on the direction off the market rather than the rate of market, meaning that if you buy less than 1% of turtle card, you make money if the market moves within 1%, either up or down. And if you buy a bunny car of 1% then you make money if the market moves  out of1% either is that go up 1% or goes down more 1%. So I think it's similar to volatility option in a traditional market. We know in the traditional finance market we have those volatility ETF and options ETF. I think that projects were designed to using some of the merits in those those financial products. So I actually come up with the name "Bunny Card" and "Turtle Card" by myself. The reason being that is very, it's very interesting because the bunny is supposed to be faster than turtle right. And if you buy bunny card if the market runs faster, then you make money. If you buy turtle card, if the market stays stable, then you make money. So the reason I picked those names, I want to give people of users a very intuitive understanding of what the product is. So I think, in the crypto industry there are two ways of designing products.  One way is want to design extremely simple product because the users are crypto investor people, many of them don't have extensive knowledge of the traditional finance. If you want to introduce a very exotic product, I mean I wanna say very very few people in crypto would buy and trade it. So if we want to target a broad user base, we wanted the project to be a simple, as intuitive as possible. So the name bunny card and turtle card explain itself so that people can really play with it.  I personally, during the test stage. I personally play with it for a bit. I think it's very addictive, to be honest. And also for another way to design product in the crypto space, it should be extremely professional. For example, the futures market right now is pretty comprehensive. I would say the future product offered by major crypto exchange  platforms are as good as the traditional futures exchange like CME and other things. We have very comprehensive liquidation strategy, very comprehensive  volume-cost strategy, very well designed, you know, the fee structure. That's pretty good. I was amazed by the speed by the 

Speaker 1:   23:49
Yeah, I definitely agree and things are heating up extremely aggressively in the derivative space. We have derivatives on CoinGecko  in 2019. We saw like there were barely any exchanges doing directives at the start of the year, but towards the end of 2019 we had like 25 exchanges and more was doing derivative.    

Speaker 2:   0:00
 Exactly.

Speaker 1:   24:29
So seeing a lot of interest in this space. So that was something very interesting. You guys are also recently launched your margin trading and other derivatives. I guess you guys have futures as well. Maybe, you want to share a little bit more?

Speaker 2:   24:35
So for the margin trading, we enable margin  trading in early 2019. It has been a while. Our margin product is actually our feature product. The party initial problem appears margins process and multi, which is different from almost all major exchange. So it's very easy to use. There is no borrow and return process. One click to buy, one click to return. And also another nice thing about that is you can use every single asset in margin bets to use as a shadow. You don't have to specialize which which asset you use as parallel . Automatic click and automatic trade opens. You have that everything will be used as a card of. That's very easy to use. The model is widely used in traditional finance if you trade US equity or any major equity in any jurisdiction. It's pretty much the same. So it's very easy for traditional traders to adopt to the crypto space. That's one thing. And for futures product we have finished the implementation of futures trading products, I think about a month ago and currently in the testing stage. I think in sometime in a week or two we will invite a few of you know, third party investors to test our new future trading features. And I think we would do a grand launch very soon, in a month or two, we will have a beta launch. And then followed by our altcoin launch for our future trading. That's pretty much the story, the current status of our derivative product.

Speaker 1:   26:02
So I got it wrong just now. You guys have not launched your futures product.

Speaker 2:   26:05
Not yet.

Speaker 1:   26:38
So I'm looking forward to tracking your future products on CoinGecko and seeing how you go. I think it's very competitive. Looking at the market share, looking at the trading volume and open interest and it's a very competitive landscape at this point in time. 

Speaker 2:   26:38
Yep, yep, yep.

Speaker 1:   26:38
So you guys have an exchange token like every other Asian based exchanges, yours is called the BitMax token with the symbol BTMX. What are some of the utility behind the BTMX token?

Speaker 2:   26:39
Well, the best part of the BTMX token is that if you're token holder you are eligible to to enroll in one of our bid share program. In this program, we offer 80% of daily commission to be distributed to our token holders. That's the core advantage for people who want to hold BTMX token. We do that because we position ourselves so that every single people will trade with us, every single token holder is owner of the exchange. So it's more like we collect community feedback. We view the community feedback and we do it for all the traders. We want to share our core benefit with everyone. That's the position we're taking. So I think BTMX token holders is very happy because the year of 2019, despite the volatility of the market, according to Tokenview, we end up with more than 300% of richer, one of the best performance platform in 2019. And I feel we  have a big year ahead in 2020. The other benefit of BTMX token holders is that you can purchase point card, which can be used to pay off the margin interest of our exchange. And it has a huge discount, 50% discount right now. And another benefit is that you can purchase multiple product we offer. For example, multiple, 3 times the multiple of your airdrop ward. You can purchase airdrop multiple cards, you know, as a regular users. So that's some of the benefit that our token holders enjoy with BitMax. Of course, down the road we have more product. We have staking, derivative, we will put more usage into BTMX tokens. As I said, we always positioned ourselves as people's exchange. So we want to share as much as we can with our token holders.

Speaker 1:   28:38
Yeah, yeah, very interesting. Actually, I'm actually a fan of exchange based token because it's probably one of the token category where you really want to do a DCF model on the token utility, you can actually do that and probably give a target price to any of this exchange tokens. And if you look at the past performance of all this exchange based tokens, it's generally one of the better performing ones.

Speaker 2:   29:03
Yes. I totally agree. One of the biggest problem in the crypto space is many projects, they don't have any profit model, meaning that they cannot generate revenues from real business, which makes it very difficult to do proper valuation on there, you know, on their project tokens. For the exchange token it's different. It's probably the only business in the crypto space right now who has real revenues and solve real problems as a real business and connect a large userbase. So I would say exchange token is definitely one of the most solid token, type of token and category in the crypto space. I totally agree with you.

Speaker 1:   29:43
Yup, yup. So in 2019 talking about the token utility we saw last year Binance started launching a native blockchain call the Binance Chain. And then usually with the trend that we see that once Binance do something, everyone starts rushing in to do the same thing. So we saw Huobi, Gate.io  Bitfinex, Bithumb, all making announcement that they also be launching their own native blockchains. I'm actually very curious to see how all these exchanges will be able to bootstrap their own native blockchain. I'm not sure if all this increased fragmentation is good for the industry and if the ecosystem can,  it will handle and support multiple native exchange blockchains. What are your thoughts about these native blockchains development and are there any plans for BitMax to launch your own native blockchain as well?

Speaker 2:   30:33
Well, I don't think I'm a big fan of native chain. I think exchange should be focusing on providing transparent platform for people to trade. That's the core value of the exchange. I don't think exchange should be focusing on native chain. To be very honest with you, even those IEO projects and also native chain thing, I want to say it's a bit beyond the scope of exchange. We did facilitate some of public sales from BitMax side. I'm not sure if you guys noticed that we never call ourselves with IEO because it's in a gray area of the legal side, from a legal perspective. It's not clearly regulated, so we always facilitate public sale. Meaning that the entity who raise money is the project itself. The process is found on the project itself, website. We are the only one to provide marketing and technology service for the project. Even though people still think us doing IEO, which I think is a misunderstanding. Personally, I think the value of any exchange native token is decided by the fundamental of exchange. The more users you get, the more volumes you get and the more value to the token holders, the higher the price the exchange will be. So it's not, I mean, the certain price can be affected by all different type of project like airdrop and IEO or other things. For the leverage on the price is determined by the fundamental of the project itself. I'm a strong believer of that. And also, aside from that native token is something I think is very overcrowded estate. We have so many over several hundred of native coin. Do we really need that many? I don't think so. And what is the purpose of native exchange serving? It's just to, I think most of them is trying to allow building a chain and doing fund raising and things like that. I don't think it's the core value or core business of exchange to get involved in that process. I mean, I kind of understand why Binance choose to do that. But I don't think it's the right direction. And I don't think BitMax will have the plan to launch a native exchange token the forseeable near future.

Speaker 1:   32:48
Yeah, I'm very glad to hear that because actually like you, I don't see the point why everyone is like Asian based exchanges are rushing to launch their own chain. It doesn't make any sense at all. I see the reason why Binance wanted to it because they are trying to decentralize their team over time and then eventually it was their plan to do a DAO for their side, for the own organization. But for the others, they're so centralize and I don't see why they should launch a native blockchain. And I have no idea how they will build an ecosystem, how they would get other teams to launch on top of the native chain. Like, why would anybody wants to launch their own token on top of their own native chain. I'm actually looking forward to see how these guys launch it this year. And I'm not optimistic of how things will perform.  

Speaker 1:   33:41
I totally agree with you.  

Speaker 1:   0:00
So if you look forward into the exchange in 10 years time, what do you see the exchange landscape will look like in 10 years time. Do you think there will be a lot more exchanges than what it is now, as it is? On CoinGecko we are tracking about 400 spot exchanges and maybe about 25 derivative exchanges. And of course, there are many more than we are not tracking. You think there will be some sort of consolidation in the space in the years to come and it will follow like the Internet industry where there is one large player for every niche, for example if you think about search, there's a leader called Google, for social media there's Facebook and so on. Or do you think this is kind of like a very niche thing and the ecosystem of the industry can support like thousands of exchanges in the space?  

Speaker 2:   34:26
I don't think there will be that many exchanges down the road. I think there will be much more vast. We have already seeing hundreds of exchanges stop operating in the past months. As soon as the bear market comes, almost many exchange that doesn't have a strong userbase and trading volume cannot stay in profit. It has to be closed and also running exchange is not an easy task. You have to consider a lot of different factors, including tech knowledge, including security, including operations, users, many, many things. It's a very large and complicated business entity because in the crypto space, exchange is pretty much a combination of everything. It's a combination of broker dealer, customer service provider, exchange itself, and also sometimes maybe it has a trading team, listing committee and, marketing department. It's not  simple. it's honestly very very complicated business. Not everyone can stay in profit in this business. Given the number of projects and daily trading volumes, I do believe a majority of exchange, probably 80% of exchange will either disappear, or they will go through some kind of M&A and merge into other exchanges. 10 years down the road, I have full confidence that most jurisdictions, the regulations will be very clear about the how to regulate the crypto trading. Therefore, the gate will be open to many traditional investors, old-fashioned investors, including maybe my Mom and Pop, who didn't even know what is crypto, they can still open account with a local broker and invest some of their money, time and money, into the space. The [inaudible] will be part of the existing financial system. How do you regulate it? So that's my vision several years down the road, not even 10 years, probably two, three years down the road. And in the crypto space, on the exchange space many, the volume will be huge. Volume would be, I would say, at least 10 times or 100 times because they are clear of regulation definitely open a large gate for large amount of money. Those traditional institution will jump into the space, will invest in the space and crypto will be a standard asset allocation for most people, you know, ranging from 1 to 10% maybe. Just as people want to buy real estate or want to buy everything now. So the volume is definitely larger. The traders in crypto would have been larger. However, we will see less and less exchange in space because the the regulation has two sides. One is it definitely protects the investors and relevant industry. Two is  it puts another burden on exchange itself, to meet the regulation standard. We've seen many of small exchange who's trading system is shaky, whose operating is not that very well, not meet the standard. They still exist because in the current space there is a lot of gray area exists. And I think once we have everything clear, there will be no space for those exchange to exists. And we will pretty much see as currently we see or other industry. We'll see, four to five leaders in the space and together with maybe 10 to 20 second tier players. That's pretty much all major industry in the planet, I will say. For example all the makers, for example cell phone makers, there will be only be four to five different giant exist in this case and together with a bunch of small players. And that's pretty much it. We don't need a 10,000 exchange action. We don't even need 1000 exchange. Even a hundred is too much, in my opinion. Yeah, that's my thought.

Speaker 1:   38:10
Very well said I suppose. So one of the things that we did was, we recently published our 2019 Year End Report and in the report we have 2020 prediction in which you gave a prediction to us.  So, let me read out the prediction that you gave to us. 2019, we saw many of the large exchanges expand coverage beyond trade facilitation in spot markets to encompass a more holistic suite of service and product offerings including derivatives, custody solutions, lending and staking. I think we will see this trend continue in 2020 and it will intensify as retail and institutional consolidate their businesses to handful of top tier platforms. I don't necessarily think we'll see many of the key industry players stray from the status quo too much with high risk innovations. Instead, we'll see top tier platforms pursue various strategies to differentiate between the existing business models and invest significant resources in keeping up the rapidly involving regulated landscape. So that was your prediction for 2020. Do you want to further explain on what else do you think will happen in 2020?

Speaker 2:   39:15
I think my message pretty much self-explain. That's my vision because compared with two years ago, the top exchange in the space I think is already very sophisticated, really comprehensive. We can no longer view them as grassroot, easy exchange. They are all very comprehensive. A lot of product they offer, there are other service we can offer, are comparable with the traditional finance exchange. So, in order to capture new market shares, in order to serve a broader audience of users, we have to focus on the details of every single product we are offering. For example, the margin product we have right now. I will say it makes 90% of people happy with the details, like more other types and better finishing and mechanism. There are things we want to improve in the 2020. So similarly other products well from staking to derivative trading. So we want to focus on details. We all say "the devil is in the details". I think going forward detail is the key definition leader between different exchanges, and we should have a different user group and satisfy most of their needs.

Speaker 1:   40:28
Yeah, I think it's very interesting and I'd like to give this analogy that I always tell people that exchanges in this day and age, especially the top competitive exchange, they are adding a lot of services and product offerings and it start to resemble a lot like a bank for the crypto space but nobody know it's a bank because it comes with a lot of regulatory compliance. But a lot of things sort of resembles the services and things that a bank would do so very interested to see what the things that you guys would be launching this year and coming to my last question, so you already mentioned some of the things you guys would do and what are some of the plans in 2020 that BitMax will plan to do and if you haven't already mentioned, then let us know what what will keep us excited for this year?

Speaker 2:   41:16
Well, as BitMax we always want to lead the industry instead of following. So like I mentioned there are two major trend in the industry. One is every top exchange want to focus on the details and to publish more on their products and BitMax the same. We want to provide as various service as we can for our users. That's one thing. So we pretty much focused a lot of details on service we already offer, we will be offering. And that's our primary goal in 2020 to improve our exchange. Two is, like I mentioned, I predict lots ofconsolidation and also on partnership between exchange going forward in 2020 and the year beyond. So BitMax is the same like, I mean as I remember when I said about BitMax early, I said, on the nature of crypto, there's one pain point that the volume is not comparable to the traditional financial market, but also very ridiculous that the traded volume are scattered into different exchange. So even Binance and Coinbase contribute as half exchange but they are trading bottom compare with NASDAQ and Majesty, it's still a fraction of that. So I will just say, going forward, volume consolidation, exchange consolidation, exchange corporation and maybe all the book share is the major trend that we will see in next few years. BitMax is always open to collaboration with top exchange on building better liquidity through to our investors. But that's somethings I want to see and I've been focused working on. And we have been contacted a few other exchanges and see if we can have some consultation on all of those and also other product cooperation. So I cannot disclose too much on this. But that's definitely something we want to see and I'm happy to see.

Speaker 1:   43:07
Yeah, I think what you mentioned just now on order book sharing. I think it's very interesting with CoinGecko Trust Score. What we observed was that started measuring 2% debt from the mid price for each exchange trading past order book, and especially I mean, for the main coins like Bitcoin, Ethereum and all, it's usually quite liquid. But I mean, liquid relative to, I mean if compared liquidity to traditional markets, it's not liquid at all but relative to other coins that you start seeing that especially a smaller cap coins, that the liquidity debt  of this order book is actually really low. So exchanges, sharing liquidity, sharing the order book to each other will actually help with expansion on the growth of the industry. So really looking forward to hearing, seeing this trend in the future. So lastly, before we close off this podcast, how can people find out more info and follow BitMax?  

Speaker 2:   44:01
Well, people can follow us on Twitter. People can join us on Telegram channel. And there are also announcement channel from us. And also we have a Facebook account,  welcome to follow us. And also we have YouTubers, we have different language communities for, I mean, we have community in 10 different languages. And during our dent, ask and our help desk is available 24/7. So if they don't reach back to you within several minutes of your questions you're free to talk to me because I'm also one of the prime service team. All right, I think thanks again for everyone for using BitMax the past year. I hope you can continue to support BitMax and build a very transparent, efficient exchange for everyone to use.

Speaker 1:   44:46
Thank you very much for joining us on the CoinGecko podcast. Very happy to have you on this show and I put that all of you listening to this show learn something interesting about BitMax and if you have any questions, feel free to ask us and you know where to find the BitMax team. Thank you very much for coming on the podcast.

Speaker 2:   45:06
Thanks, Bobby. Thanks, everyone.  

Speaker 1:   45:09
All right, that wraps up the show. Thank you very much for listening to the CoinGecko podcast with Bobby. If you like our show and want to know more, check out podcast.coingecko.com or please leave us a review on iTunes. If you have any feedback, do drop us an email at hello@coingecko.com. Join us for more next week. See ya.

Speaker 1:   45:28
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